Midland, Odessa economies still booming

Published 11:45 am, Sunday, February 3, 2013

Pumpjack at sunset Thursday in Midland. James Durbin/Reporter-Telegram

Pumpjack at sunset Thursday in Midland. James Durbin/Reporter-Telegram

Photo: JAMES DURBIN

Midland, Odessa economies still booming

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All components of the Midland and Odessa economies were at full strength as 2012 came to a close.

"We certainly would have predicted a year ago" that the Midland-Odessa economies would grow in 2012, said Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Index for the Midland Development Corp., Security Bank and the Reporter-Telegram. "But not perhaps some of the things we saw during the year."

The index at the end of 2012 was 12.4 percent higher than at the end of 2011, and Ingham said the index has risen more than 43 percent, an average of over 15 percent annually, in the current growth cycle. The December increase was the 34th consecutive month-to-month increase.

Jim Smitherman, chief executive officer of Security Bank, said after a slowdown during the holidays, his bank has noticed an increase in activity.

"The new budgets have kicked in, and we expect to be as busy as ever," Smitherman said. "I don't know how we'll meet the demand."

The Midland economy "has been phenomenal," said Pam Welch, MDC executive director. "We've seen sustained growth for 10 years, and the nation and the world are taking note as evidenced in investment in business, new businesses and development."

"There was prognostication by very reputable firms that Midland and Odessa would actually lose jobs, though not many, in 2012," he said.

At year's end, Midland reported the lowest unemployment rate in the nation, according to the U.S. Bureau of Labor Statistics, he said. Beyond.com, The Career Network, ranked Midland in its top 10 places to find a job.

Welch said Midland has been ranked top in the nation in terms of job growth from 2006 to 2011, and she expects the city to rank high nationally when other surveys are released in the coming months.

"There is a lot of interest in Midland," she said. "We're getting a lot of calls, a lot of inquiries about Midland and how they can help our economic development continue."

She described the inquiries as diverse and not focused just on the oil and gas industry.

More than $4.6 billion in taxable retail sales were made in the two cities in 2012, up 16.8 percent compared to 2011. That cash flow comes from the $28 billion worth of crude oil and $3.17 billion of natural gas produced from West Texas wells in 2012. Ingham explained that those figures are adjusted for inflation dating back 1995 and the actual amount "is considerably higher."

"Businesses are a large payer of sales taxes, including oil and gas companies," said Ingham. "Those numbers are also bolstered by increases in wages, which are spent locally."

He said the wages are bidding higher as companies try to fill job openings and compete with oilfield wages.

Automotive spending also remained strong in 2012, rising 28.6 percent compared to 2011, the third year of double-digit growth

Construction "was just huge" at $753.6 million, up 59.6 percent compared to 2011, he said.. That exceeds the year when a $200 million power plant was permitted in Ector County.

"You had an enormous number of projects, some big, that tied the two cities together," he said. "That is an extraordinary level of construction activity, even for two combined cities."

The cities of Midland and Odessa issued a combined 1,144 permits for new homes in 2012 and 3,035 existing homes were sold during the year. The average sales price rose 10.8 percent to $210,086. "An increase in the sales price of 10 percent-plus tells us there is simply a shortage of housing," Ingham said. "The housing that is being built is not doing a lot to alleviate the shortage."

He said the fact that hotel-motel tax collections have doubled in two years, with $10.2 million collected last year, reflects not only business travel but the housing shortage as companies rent hotel rooms for their workers. Hotel-motel tax receipts were up more than 50 percent compared to the previous year for the second straight year.

This remarkable growth has been powered by the region's oil and gas industry, which has been cooling off since last spring. In the past, a slowdown in oil and gas activity was soon reflected in the area's overall economy, which has not been the case yet, though Ingham said it could still occur.

"Even if there is a cooling off in these numbers, there will not be anything approaching an undoing of the growth that has taken place," he said.

Cargile predicted the local economy will remain strong. However, he said, "The growth rate will decline over the next few years simply due to more difficult (higher) comparison years."

He also predicted the demand for oil will remain strong this year as Europe stabilizes and economies in China and other emerging markets recover.

"I believe a floor exists this year for oil prices around $80 and expect prices to average $90 to $110 for the year," he said. "My case for prices supports a strong energy economy."